Companies see no reason to pay more due to over-supply of job applicants

Employers have reported a “relatively sharp” increase in job applicants from EU countries, contradicting claims that Brexit is restricting the supply of low-skilled labour.

The Chartered Institute of Personnel and Development (CIPD) said a “buoyant” labour market showed no overall sign of a struggle to recruit workers. Its market outlook found an average of 24 applicants for each low-skilled job. That falls to 19 for every medium-skilled job vacancy and eight for every high-skilled position.

The robust supply of labour will mean sluggish wage growth will continue, with employers expecting to award pay rises of just 1pc over the next year. That is despite an increase in the proportion of employers expecting to hire more staff over the next year.

As well as more prospective EU workers, employers reported an ­increase in applications from former benefit claimants moving back into the jobs market, and a surge in the number of “baby boomer” jobseekers aged ­between 50 and 64. The CIPD cautioned that “future migration trends appear highly uncertain” but said the labour supply was strong.

“Predictions of pay growth increasing alongside strong employment growth is the dog that hasn’t barked for some time now, and we are still yet to see tangible signs of this situation changing in the near term,” said ­Gerwyn Davies, senior labour market analyst at the CIPD.

“The facts remain that productivity levels are stagnant, public sector pay increases remain modest while wage costs and uncertainty over access to the EU market have increased for some employers. At the same time, it is also clear that the majority of employers have still been able to find suitable candidates to ­employ at current wage rates due to a strong labour supply until now.”

The findings contradict a survey last week by the Recruitment and Employment Confederation, which claimed “employers are not just struggling to hire the brightest and the best but also people to fill roles such as chefs, drivers and warehouse workers”.

Fears over post-Brexit migration rules have been a focus for business lobby groups. The CIPD’s findings will be a boost to the Government as it ­attempts to reassure employers to keep the economy moving through Brexit.

However, businesses said that other costs were rising, reducing their ability to increase wages. These include the national living wage.

Another factor is the introduction of auto-enrolment pensions which compel companies to contribute to workers’ long-term savings, a cost cited by 21pc of firms when asked why they are not paying more.

Until earlier this year the Bank of England estimated that the so-called natural rate of unemployment was 5pc – meaning that wages should start ­rising when joblessness falls below this level.

But when that did not happen, in February economists at the Bank cut their estimate to 4.5pc.

Unemployment has fallen to that level and could even dip below it when the latest jobs numbers for June are published this week, but pay growth has still failed to take off.